Comments on: Strategic Defaults in Florida

By: Quote of the day – Kevin Burke

Quote of the day – Kevin Burke — Fri, 30 Oct 2009 19:48:11 +0000

[...] social stigma of defaulting on a home loan is fading quickly. • Property values have plummeted by an average of 50% • In Q4 2008, strategic defaults [...]

By: Onlooker from Troy

Onlooker from Troy — Wed, 28 Oct 2009 18:40:49 +0000

Indeed, those that are really getting hurt in this whole fiasco are the ones who actually put down substantial money in downpayments (or any for that matter). That’s lost money. Those with very little skin in the game are at an advantage as they can walk with little to no loss other than their credit ratings. Recourse mortgages obviously complicate that and make for a more painful experience.

The problem is that the taxpayer has taken on a large majority of the liability for these mortgages, and instead of banks/corporations being at risk, our sovereign currency is now at risk. Defaults should be taken in the private sector, as painful as that is in the shorter term. The long term consequences of not doing that are going to be terrible, and frightening.

By: bman

bman — Wed, 28 Oct 2009 18:13:16 +0000

Kort your math is still wrong, the guy is 35 years old and works at a hotel. I didn’t see his interest rate, I don’t think the article mentions it but I doubt he was paying 5.75% my estimate of 12.5 % is probably
closer to the mark considering unless he’s managing the hotel he works in he was probably unable to get a decent interest rate two or three years ago, but he was likely able to get a loan with a ridiculous ARM attached to it. Accordingly $1900-1200 is still $700 dollars a month and in the interim, 1900-zero is $1900 saved a month.
Yes, the ethics are wrong, but why should individuals exhibit any better ethics then the greedy banks they have to associate with?
Jingle mail might make one feel as if they are somehow more ethical than this person who is basically squatting in an unmanaged bank asset, but the only difference is how soon you move out.

By: Brendan

Brendan — Wed, 28 Oct 2009 17:09:54 +0000

@Mark, the confusion between the two is no accident based on my observations. Reaganomics was the based on the misguided amalgamation of the two. Back when I was in college, my econ101 prof, who I suspect was a student of this “theory,” told our class that there really was no point studying macroeconomics, because everything could be explained by microeconomics. Apparently you can apply Occam’s Razor to everything, even in the most inappropriate circumstances. Who needs macroeconomics when you can apply a healthy dose of Occam’s Razor to the entire world economy and viola! you have micro! And then why stop there, might as well explain micro in terms of how your personal finances work. This all works great for those on top. Tell everyone that the economy works like their personal finances, and the peons who believe you will keep making payments that are pushed up to those on top who can become rich based on the fact that the economy doesn’t actually act like your checking account. And even better, when it all goes wrong, the peon’s (like me) will bail you out. Seems like virtually everyone was buying it. Some people are now starting to realize that’s not true: the economy doesn’t work like your personal finances. The rest sit and scream about “balanced budgets” in a time of economic recession, as if it’s going to help the situation.

This all is kinda’ like being taught that if you push in a girl’s chair and buy her flowers, she’ll fall for you; and then watch all the beer-swillin’ a-hole “bad boys” get all the chicks, while the only girls you get are just using you. Sooner or later you realize that you’re world view was flawed. So you either join the other side (default on your mortgage/start being rude to the girls), or you stick to your morals. Or you hire a dating coach (RE agent) who tell you to fib a little to attract the girls (fudge your income on your loan ap). When your relationship falls apart over the lies, who’s at fault? The liar, or the “expert” who gave you the advice? The question is, have the peon’s been used hard enough to deserve a break, or does the bad behavior need to be stopped before it get’s out of control even if it hurts those who are, in the grand scheme of things, only guilty of believing what they were told by the so-called experts. Probably a mixture of both.

By: Strategic Non-Foreclosure | The Big Picture

Strategic Non-Foreclosure | The Big Picture — Wed, 28 Oct 2009 16:02:24 +0000

[...] morning, we discussed Strategic Mortgage Default. This afternoon, let’s look at Strategic [...]

By: Kort

Kort — Wed, 28 Oct 2009 15:59:00 +0000

@Bman, you are right and wrong. You are right when you speak to the “stampede” and, as I wrote, more power to the “them”. I said nothing of stopping the stampede and jingle mail makes a lot of sense. I mentioned 1 person, specifically.

But in the “thems” are a lot of clowns. This guy, specifically, is (as I wrote) fretting about his “monster of a debt”. Well, this “monster” would be there regardless of whether the house was worth X or less than X or more than X and it’s a $125K mortgage (nice yard in the pictures). This is not some McMansion he bought for $1.2M that is now worth $700K. And, as I wrote, he didn’t cut and “run”—he’s still there. It’s a great move, no doubt—who wouldn’t want to live for free. I would have thought differently of him if he did actually Jingle Mail and send his keys back and move on. But, it appears he didn’t.

As for the payment, a 5.75% mortgage and no money down—$725 per month which is, as I said, barely $700 per month. Point is, $700 +/- is a normal rent payment in a normal apartment complex in a normal city (ie, not New York) and yet, somehow, this $700 is a “monster of a debt”. My point was, is, that he’s fretting over something he’d had to PAY ANYWAY—he’s gotta pay somebody, somewhere, $700+ to live.

And yet you wax poetically about renting a 3 bedroom aparment for $1200—but you forget, in the context of this 1 clown, that $1200 > $700 and if $700 is a “monster of a debt” than $1200 is crushing too.

I don’t work for a bank.

I think you were 99% off base. Everything else you wrote I agree with.

By: Mannwich

Mannwich — Wed, 28 Oct 2009 15:16:06 +0000

All bets are off now. The sheeple’s only card left to play (and it’s a doozy) is to jack up their remaining debt levels and walk away. Don’t think it won’t happen.

By: bman

bman — Wed, 28 Oct 2009 14:54:57 +0000

Kort you are wrong. He might have made a bad decision. Buying a lousy house that he doesn’t care about. But once that is factored out. Free rent for a year and paying off credit card debt sounds downright smart. You Kort are a clown for thinking he should stay in a place he doesn’t particularly care for, that has less value then what he owes on it, when in 24 month period he can rehabilitate his credit score and buy a better house that he does like for half the price. Also your math is screwy, interest alone on 125 k at a reasonable 6.5% is almost 700 bucks a month, and on top of that, property tax and insurance plus escrow he could be well over 1k per month. If he doesn’t have a reasonable interest rate which is likely the case, the math goes ridiculous. Say he had an ARM that bumped up to 12.5% then interest alone is over $1300/month add onto that taxes insurance and escrow and you could be up near 2k a month.
In this case he says skip that, I’m not paying the banks twice with my mortgage and my taxes, I’ll rent a nice three bedroom place for 1200/month, save the extra 600-800 bucks for a down payment in two years that will buy him a nice place that is valued to match the loan amount.
You Kort are a clown for trying to stop a stampede, I wonder if you work at some bank that is exposed to this type of strategic foreclosure, what do you get for taking such a foppishly clownish stance?

By: ashpelham2

ashpelham2 — Wed, 28 Oct 2009 14:44:24 +0000

Once we have forgotten that it is right and moral to pay one’s debts, then I guess we’ve basically torn up the thread that holds society loosely together, as much as it is still “together”.

The system has raped the public for a long time, and now the public feels it is right to return the favor. I will continue to pay my bills as long as I can, even if those checks are written to CitiBank and Bank of America.

By: Kort

Kort — Wed, 28 Oct 2009 14:15:40 +0000

More power to them, but the first guy written about in the article is a clown. He’s talking about this “freaking monster of a debt” and it’s a whopping $125K house so it’s barely a rent payment of $700 a month (assuming no money down)…chump change for nearly everybody with a job. The article says he “cut and run” but it sounds like he didn’t run—he stayed, and just didn’t pay his rent/mortgage for a year while paying off his credit cards.

I’m happy for him but he, specifically, is still a clown.